The Finance Minister has announced that the government business handled by the government banks i.e. the public sector banks will also be provided to the private sector. Already certain government businesses have been slowly handed over to the new generation private banks. State Bank of India was handling 99% of the government business at one point of time. Now it has come down to 58%.
The government’s attempt may appear trivial to many, but the deep rooted conspiracy is to kill the public sector banks by depriving them of not only government business but government deposits, government accounts, salary accounts of government and public sector employees and in turn, make it difficult for them to compete.
While taking away the government business from the government banks, the Prime Minister also declares that the government banks should increase the lending under government schemes. Let us look at some statistics. Of the total Jan Dhan Accounts which are opened even with zero balance, less than 3% of the accounts are opened by the private banks though they handle more than 30% of the total advances and deposits. As on 24.02.2021, there were 42.92 crore Jan Dhan Accounts. Out of these 33.17 crore accounts are handled by the public sector banks. 15.53 crore accounts were opened by SBI alone which are un-remunerative but the banks incur a cost in opening these accounts. Ms. Arundathi Bhattarcharya, had openly expressed when she was the Chairman, that her request to the government to reimburse the cost of expenses on these accounts did not yield any result and thus she increased the service charges like minimum balance charges, ATM charges, loan processing charges etc affecting the common men and women.
Regional Rural Banks which are also public sector banks have opened 7.50 crore Jan Dhan Accounts whereas the private banks have opened only 1.25 crore. Similarly in the case of Mudra Loans, public sector banks and Regional Rural Banks have contributed a lot through direct loans as well as loans to Non Banking Financial Companies.
If we take SBI as an example we can understand the contribution of public sector banks and how they indirectly benefit.
As on March 2020, SBI had 44.89 cr customers, 22.84% of the market share in deposits, 19,69% of the market share in advances, 22141 branches, 58555 ATMs, 61102 Business Correspondent outlets and handled Rs.5262643 cr government business. Though the remuneration for handling government business is less than the expenditure to handle them, government deposits are held with SBI. Most of the salary accounts were with SBI including the defence personnel accounts. Kotak Mahindra Bank has now signed an agreement to handle accounts of Army personnel.
In the last one year SBI has given 36 crore in housing loans. Most of these are backed by salary accounts. Rs.219062 crore worth personal loans were disbursed last year which are also backed by salary accounts under the Express Credit Schemes.
SBI and other public sector banks also handle other unremunerative schemes of the government like the PM Jeevan Jothi Bima Yojana, PM Suraksha Bima Yojana, Atal Pension Yojana etc. They also run Rural Self Employment Training Institutes (RSETIs) to provide skills to unemployed youth. SBI alone has 152 RSETIs and 341 Financial Literacy Centres which conducted 29995 camps on Financial Literacy last year alone.
SBI alone has spent Rs.27.47 crore on corporate social responsibility. In the last one year SBI has given 76572 Education Term Loans, disbursed Rs.87777 crores and handled 4424777 kisan credits.
By taking away the government business, banks will lose the commission on government business, they’d lose the government deposits and salary accounts which will lead to a reduction in the income. But under pressure, they will continue to give loans under government schemes like MUDRA Yojana which turns into NPA very quickly. This reduction in business will lead to reduced staff strength.
The banks had implemented the Demonetisation schemes without any financial support from the government and lost a lot of money in collecting, handling and disposing of the old currency. After milking the public banks so much now the government wants them to go to goshala and die a natural death. It is the government policies which increase the NPAs, but the government just wants to kill the public banks without understanding the consequences.
Thomas Franco is former General Secretary of All India Bank Officers’ Confederation.
Picture courtesy: Wikimedia Commons